CBN’s Auction: Wealth Managers Expects Strong Demand For T-Bills

Analysts have stated that they expect strong demand for the Central Bank of Nigeria’s Treasury Bills Primary Market Auction Scheduled for 14th May 2020.

Meristem’s wealth management experts have noted that existing T-Bills worth N33.84 billion will mature, and an equal amount will be issued in the 91-day, 182-day, and 364-day instruments.

The CBN is expected to auction N4.38 billion, N12.92 billion and N16.54 billion in the 91-day, 182-day, and 364-day instruments, respectively.

Outlook on Yields

Meristem stated that since the last Treasury Bills auction, bearish sentiments have permeated the secondary market for T-Bills with an advancement in average yields by 13bps to 2.55%.

“Yields across the 1M, 3M, 9M and 12M instruments inched up by 0.09%, 0.16%, 0.26% and 0.14% respectively, apart from the 6M bill which remained flat.

“Stop rates at the last T-Bills auction also declined further with the 91-days, 182-days and 364-days stop rates pegged at 1.85%, 2.50% and 3.84% respectively”, the wealth management firm explained.

Investors’ participation nonetheless remained strong with respective bid to cover ratios of 1.84x, 2.61x and 2.10x for the 91-day, 182-day, and 364-day instruments, the firm added.

In its review note, Meristem remarked that in the global space, major countries around the world have commenced a gradual easing of the COVID-19 induced lockdown with the re-opening of some business segments, while treading cautiously on the path back to normality.

In the same vein, the Federal Government of Nigeria on the 4th of May 2020, lifted the lockdown which spanned for a month across key states, attaching some conditions to the new policy.

“As a result, there has been a pick-up in economic activities”, the Wealth management remarked.

Given the influx of open market operations (OMO) maturities in recent times, with another worth N296.95 billion set to mature this week, the 14th of May 2020, Meristem said it envisages excess liquidity in the system.

Hence, the wealth management professionals expect demand for instruments at the upcoming auction to remain strong.

CBN’s Auction: Wealth Managers Expects Strong Demand For T-Bills